Alert May 15, 2012

Update: Massachusetts Gaming Commission Holds Weekly Meeting

On May 15, the Massachusetts Gaming Commission convened another public meeting, which was attended by a member of Goodwin Procter’s Gaming, Gambling & Sweepstakes Practice. This week’s highlights included:

Administration

Executive Director Update

  • The RFP for a search firm to find a permanent Executive Director for the Commission elicited two responses, which  are under Phase One review by staff. Once Phase One review is complete, the responses will be substantively evaluated.  No direct mention was made of Acting Executive Director Stan McGee’s resignation.
  • The gaming consultant prepared a draft Executive Director description that is being considered by the commissioners.  Commissioner Zuniga indicated that it should be (i) made clear that the Executive Director’s hiring of staff and officers is subject to the Commission’s approval and (ii) evident that the Executive Director serves at the discretion of the Commission.  Chairman Crosby said that he would like to increase the emphasis on the importance of regulatory gaming management experience.

Other Hiring Needs

  • The Commission received over 600 applicants for administrative and organizational staff positions and is vetting those applications.  As with all hires, those applicants will be subject to background checks.
  • Commissioners Zuniga and Crosby have been talking to people about adding more senior-level support to fill the void of the Executive Director position.  They are hoping these informal discussions will allow them to make some specific recommendations. The challenge is figuring out the tasks for each individual, since there is no CEO or Executive Director to do the hiring or draft specific job descriptions. Commissioners McHugh and Crosby agreed that the gaming consultant’s work plan would assist them in delineating these roles and positions.

Outside Counsel Status

  • The contract with outside counsel Anderson & Krieger was executed and a work plan is in place. Anderson & Krieger has provided a thorough analysis of the Gaming Act and provided legal support for the transition of duties from the Racing Commission to the Gaming Commission.

Gaming Policy Advisory Committee

  • Chairman Crosby posed a question regarding the Gaming Policy Advisory Committee and various subcommittees that are to be established pursuant to the Gaming Act, wondering if they should be established before or after the licensees are selected. Commissioner McHugh indicated that the statute would suggest that the Advisory Committee is to be established after the licensees are selected and is to have an ongoing advisory role, but that there’s no reason they can’t consider establishing a partial committee earlier through regulation. Commissioners Crosby and Zuniga voiced a preference for creating an Advisory Committee sooner rather than later to assist with policy considerations.

Racing Commission

Transition Plan

  • Commissioner Cameron discussed the transfer of responsibilities from the Racing Commission to the Gaming Commission by May 21. The Division of Professional Licensure (DPL) will continue to be responsible for administrative matters, while the Gaming Commission will be responsible for the judicatory functions and policy approvals formerly performed by the Racing Commission. Commissioner Cameron will hold monthly adjudicatory hearings, issue written opinions and grant policy approvals. She will present her recommendations to the Gaming Commission for its approval prior to ruling on the matters.
  • DPL Director Casey Atkins presented and said that DPL would continue oversight of daily operations, including management of personnel, administrative matters and financial operations. The DPL Staff Attorney will continue to provide advice and counsel to the Gaming Commission. For the balance of the racing year, the day-to-day activities for DPL employees will remain unchanged. Chairman Crosby expressed interest in having the entire Commission visit the various racing facilities in the state.

Emergency Regulations / Required Votes

  • Four motions were unanimously approved in anticipation of the transfer of authority from the Racing Commission to the Gaming Commission:

    • to promulgate emergency regulations that will provide for keeping the existing regulations in place until the Commission has a chance to evaluate them;
    • to give public notice of the emergency regulations;
    • to authorize Commissioner Cameron to execute an interdepartmental service agreement concerning the transfer of responsibilities to the Gaming Commission; and
    • to provide Commissioner Cameron with the discretion to approach the Division of Administrative Law Appeals for assistance in her role as hearing officer if the workload proves more time consuming than beneficial.

Gaming Consultant

Work Plan

  • The majority of the discussion was meant to focus on the gaming consultant and the proposed work plan. The gaming consultant, however, canceled at the last minute. The work plan represents the totality of the work that will be completed during a 16-week period.
  • Commissioner Cameron suggested that each commissioner be assigned a specific hiring category so that the consultants are not expected to meet with all commissioners to discuss every hire.
  • Commissioner Zuniga expressed concern over the concentrated timeline, in particular the schedule for some of the weeks in June and July.  He indicated a need to better understand the resources and work allocation.
  • Commissioner Zuniga also pointed out that the work plan anticipates the public hearings to be held after the completion of the work plan. He wondered if there would be time to consult with the key stakeholders throughout this process. Chairman Crosby agreed and emphasized the need to layer in communication and an outreach plan. He said the process may take longer than 16 weeks to do it right, and that they will probably max out the $500,000 cap (Commissioners Zuniga and Crosby are negotiating the contract and are hoping to receive a fixed price).

Finance / Budget Update

  • Commissioner Zuniga gave a budget update and said that he would begin to incorporate the executed contracts and service agreements as encumbrances in the finance reports.

Public Education and Information

Economic Development Forum

  • Commissioner Stebbins provided an update regarding the Economic Development Forum. The goal is to finalize speakers this week and then distribute information regarding the event next week. They are also working on confirming panelists for the forum on Community Mitigation and Compulsive Gambling.

Responses to Requests for Information

  • Commissioner McHugh posed two questions regarding requests for information that had been sent to the Commission:
    • One request solicited advice on whether developing a particular kind of poker room would be allowed under the current regulations. He pointed out that there aren’t any current regulations, but emphasized the broader question—how should the Commission respond to questions that amount to requests for specific legal advice? Commissioner McHugh recommended that the Commission not engage in giving specific advice; individuals must consult private counsel to receive answers to such questions. While most of the commissioners agreed with this approach, there was some discussion as to how to handle these requests. Chairman Crosby would like to be able to point these individuals to a different governmental body or business resource in the community that could help them. He said, “Nothing is worse than getting a bureaucratic letter saying ‘we can’t help you.’”
    • The second request posed the question: who is responsible for ensuring that public officials in the city or town where an individual resides negotiate with the casino people? The individual was wondering how to get his or her town interested and motivated in pursuing a casino license. Commissioner McHugh stated that the regulations are clear that a community host agreement and vote to approve the agreement by the community are required, but the Gaming Act does not specify the process for negotiation of the agreement. He recommended that these decisions be left to the municipal governmental bodies.

Other Business

Online Gambling

  • Lastly, and most unexpectedly since it did not appear on the agenda, Commissioner Zuniga provided an update on the Online Products Task Force (“OPTF”). Commissioner Zuniga is the Gaming Commission representative on the OPTF, and Chairman Crosby attended and spoke at the OPTF meeting on May 14. The following items regarding the OPTF meeting were discussed, as was, more generally, the potential for online gambling in the Commonwealth:

    • Chairman Crosby’s comments at the OPTF meeting emphasized that the conversation regarding online gambling is one regarding benefit to the Commonwealth, not one of a turf war between the Gaming Commission and the State Lottery.
    • Commissioner Zuniga emphasized that, as the OPTF looks at the possibility of online products, these decisions will really be up to the discretion of the legislature. The OTPF is thinking strategically regarding possible next steps and the recommendations that could be issued prior to the legislature moving forward with online gaming (if the legislature wants to move forward). The OPTF studied a report regarding the impact of online gaming in international jurisdictions but found that none of the other jurisdictions apply well here. Commissioner Zuniga said that there is a notion that the introduction of online products may not necessarily cannibalize either casinos or the lottery—that, if done thoughtfully, it could enhance the two operations.
    • Commissioner Cameron asked if there was any discussion regarding the federal government’s role in the regulation of online gambling. Commissioner Zuniga referenced the DOJ Memorandum Opinion, saying that it left the door open for lottery and gaming commissions to take the lead—as long as the online gaming does not violate the Wire Act (in other words, contain sports betting), then the state is free to regulate it. Commissioner Zuniga professed that the general opinion after the issuance of the Memorandum Opinion is that the DOJ is deferring to the states. Interestingly, he indicated that there’s a sentiment that, the first person through this open door will get an advantage, which is why the Treasurer wants to explore the issue sooner rather than later.
    • Chairman Crosby indicated that, while online gambling is not at the top of the Gaming Commission’s issues list at the moment, it could become so very quickly. In particular, he said that people have been asking whether the Gaming Commission can successfully negotiate with the casinos when they still don’t know whether online products are an option.
    • Chairman Crosby also addressed the turf battle, saying that the State Lottery is extremely concerned about whether the introduction of online products will enhance or detract from the Lottery’s operations. This concern is hard to address, as there is no test case to show what happens when online gaming is brought to states with casinos and lotteries. Chairman Crosby said it is particularly hard to make comparisons to Massachusetts because Massachusetts residents currently spend nearly three times the national average on the lottery.
    • Commissioner Zuniga emphasized that, in general, online products attract a younger demographic, whereas the lottery is a mature and successful operation but has an aging demographic. “From strategic perspective, that’s something to consider,” he said.

The next meeting will be on May 22 at 1:00 pm, at the Division of Insurance, 1st Floor, Meeting Room E, 1000 Washington Street, Boston.

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Those interested in learning more about Goodwin Procter’s gaming and gambling expertise and practice, and/or the issues outlined above, should contact David Apfel or Bob Crawford, co-chairs of Goodwin Procter’s Gaming, Gambling & Sweepstakes Practice.